Western Digital To Acquire Hitachi Global Storage Technologies

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News Posted: Mon, Mar 7 2011 10:46 AM

Western Digital plans to acquire Hitachi Global Storage Technologies in a cash and stock transaction valued at approximately $4.3 billion. The resulting company will retain the Western Digital name. By combining these companies, WD says the end result will be a “customer-focused storage company” that will offer the industry’s broadest product lineup. Some of the benefits WD expects to gain from the acquisition include enhanced R&D capabilities, comprehensive market coverage, and scale that will further enhance the cost structure.

Western Digital to Acquire Hitachi Global Storage Technologies

Combination of Hard Drive Companies Will Create Industry's Broadest Product Portfolio and a Significant Pool of Resources for Innovation

IRVINE, Calif. and SAN JOSE, Calif., March 7, 2011 /PRNewswire-FirstCall/ -- Western Digital (NYSE: WDC) and Hitachi, Ltd. (NYSE: HIT / TSE:6501) announced today that they have entered into a definitive agreement whereby WD will acquire Hitachi Global Storage Technologies (Hitachi GST), a wholly-owned subsidiary of Hitachi, Ltd., in a cash and stock transaction valued at approximately $4.3 billion. The proposed combination will result in a customer-focused storage company, with significant operating scale, strong global talent and the industry's broadest product lineup backed by a rich technology portfolio.

Under the terms of the agreement, WD will acquire Hitachi GST for $3.5 billion in cash and 25 million WD common shares valued at $750 million, based on a WD closing stock price of $30.01 as of March 4, 2011. Hitachi, Ltd. will own approximately ten percent of Western Digital shares outstanding after issuance of the shares and two representatives of Hitachi will be added to the WD board of directors at closing. The transaction has been approved by the board of directors of each company and is expected to close during the third calendar quarter of 2011, subject to customary closing conditions, including regulatory approvals. WD plans to fund the transaction with a combination of existing cash and total debt of approximately $2.5 billion.

WD expects the transaction to be immediately accretive to its earnings per share on a non-GAAP basis, excluding acquisition-related expenses, restructuring charges and amortization of intangibles.

The resulting company will retain the Western Digital name and remain headquartered in Irvine, California. John Coyne will remain chief executive officer of WD, Tim Leyden chief operating officer and Wolfgang Nickl chief financial officer. Steve Milligan, president and chief executive officer of Hitachi GST, will join WD at closing as president, reporting to John Coyne.

"The acquisition of Hitachi GST is a unique opportunity for WD to create further value for our customers, stockholders, employees, suppliers and the communities in which we operate," said John Coyne, president and chief executive officer of WD. "We believe this step will result in several key benefits-enhanced R&D capabilities, innovation and expansion of a rich product portfolio, comprehensive market coverage and scale that will enhance our cost structure and ability to compete in a dynamic marketplace. The skills and contributions of both workforces were key considerations in assessing this compelling opportunity. We will be relying on the proven integration capabilities of both companies to assure the ongoing satisfaction of our customers and to bring this combination to successful fruition."    

"This brings together two industry leaders with consistent track records of strong execution and industry outperformance," said Steve Milligan, president and chief executive officer, Hitachi Global Storage Technologies. "Together we can provide customers worldwide with the industry's most compelling and diverse set of products and services, from innovative personal storage to solid state drives for the enterprise."

Hiroaki Nakanishi, president, Hitachi, Ltd. said, "As the former CEO of Hitachi GST, I always believed in the potential of Hitachi GST to become a larger and more agile company. This is a strategic combination of two industry leaders, both growing and profitable. It provides an opportunity for the new company to increase customer and shareholder value and expand into new markets. Additionally, it is important to us that WD shares common values with Hitachi GST to create a more global company that is well positioned to define a broader role in the evolving storage industry."

WD's exclusive financial adviser on the transaction is Bank of America Merrill Lynch; its lead legal adviser is O'Melveny & Myers LLP. Goldman, Sachs & Co serves as financial adviser to Hitachi, Ltd. and Hitachi GST. Legal advisers to Hitachi, Ltd. and Hitachi GST are Morrison Foerster LLP and Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates, respectively.

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LLeCompte replied on Mon, Mar 7 2011 12:02 PM

seagate just got a little nervous with this deal going down. They better step it up if they want to remain alive.

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Man..the "spinning hard drive" business is gooood!!!...now all that remains to see is Just how long will it take WD to overtake Seagate as the world's largest hard drives and storage solutions manufacturer??

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Get as much of the market while it's there.

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coolice replied on Mon, Mar 7 2011 3:52 PM

Well, I've been a wd person for quite some time.... and its a good move they bought hitachi.... cause hitachi just came out with those crazy servers hard drives... extremely high MTBF's, the whole 9 yards.

Well.... w/e keeps the two companies go neck to neck

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As long as it doesn't mean higher prices for platter drives then I don't care about it. Fewer companies usually means higher prices though,........

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coolice replied on Mon, Mar 7 2011 5:40 PM

Ah yea, true, sorry, the two companies i meant were wd and seagate. Though your right, fewer companies = higher prices.

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I don't understand the logic behind this acquisition.

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rapid1 replied on Mon, Mar 7 2011 10:36 PM

WD was already bigger though slightly so than Seagate, with this purchase though they have done two things positive for them. The first is they now outsize Seagate considerably, and are from what I have read the largest period in the sector. The next thing they did by buying Hitachi is they bought a significant over producer. Hitachi was able to make drive's that were comparable to both WD and SG, and they under priced them, on top of that they would over produce thereby flooding the market, and making WD/SG lower prices to match or come close to it.

This is why competition is good, the thing that stinks about this is that competitor (which although large was not quite the scale of WD/SG). So basically in the long run this is actually pretty bad for the consumer as not only does it give WD more market control singularly, it also make that true, and gives them auto SSD room in the market which they did not have before.

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